Southern Co. President Chris Womack plans to turn his team’s attention to reviewing its mergers and acquisitions options—with the chance of being a seller and/or a buyer—once it has brought to market the long-delayed Vogtle 3 & 4 nuclear power project.
Speaking to analysts and investors after Atlanta-based Southern reported first-quarter earnings, Womack said completing work on Vogtle will, along with Southern not needing to raise equity in the near future, free up time and attention for his team to review Southern’s portfolio of companies and look to boost the company’s valuation.
“We’re really going to focus on […] unlocking our full potential,” said Womack, who took over as president a month ago and is preparing to assume Tom Fanning’s CEO role at Southern next month. “We are large enough to [remain] a standalone. At the same time, we’ll also look at the market and look at our hand from both a buyer’s and seller’s perspective.”
Womack’s comments about possible acquisitions and divestitures come as a number of utility peers around the country are working on or contemplating deals. The leaders of regional neighbor Dominion Energy Inc. late last year launched a broad strategic review of its businesses while on the West Coast, PG&E Corp. is looking to sell up to half of its non-nuclear generation assets.
Not all transaction plans have gone swimmingly, though: Just in the past few weeks, American Electric Power Co. Inc. and Algonquin Power & Utilities Corp. pulled the plug on their plan for the latter to buy Kentucky Power Co. while the leaders of PNM Resources Inc. and Avangrid Inc. have extended their deal deadline a second time.
Southern’s subsidiaries—Alabama Power, Georgia Power, Mississippi Power, Southern Power and Southern Company Gas—combined to generate nearly $6.5 billion in operating revenues during the first three months of this year, a decrease of 2.5% from early 2022 in large part to a very mild winter across much of the Southeast. Net income for the quarter fell to $862 million from $1.0 billion in the prior-year period.
Also contributing to the lower numbers was an unexpected drop in industrial activity as manufacturers pulled back. While weather-adjusted sales to residential and commercial customers rose 1.2% and 1.8%, respectively, industrial sales fell 0.8% after adjusting for the closure of a large factory in Southern’s service area. Fanning, Womack and their team had been looking for industrial sales to climb 2% but CFO Dan Tucker told analysts a number of housing-related manufacturers have been pulling back.
Over the medium term, however, Womack and Turner see good things ahead on the economic development side of their business. The Inflation Reduction Act is starting to spur investments and other emerging industries such as electric vehicles are set to generate thousands of jobs across the Southeast.
Shares of Southern (Ticker: SO) were up about 1% to $73.39 in late trading April 27. Over the past six months, they have risen more than 10%, growing the company’s market capitalization to about $80 billion.
